SAVINGS AND INVESTMENTS 4
Nomatter how big a person`s income is, he/she has to ensure thathis/herfuture is secured. Learning how to budget and save moneyeverymonth is a very important factor. One has to operate the changes inincome, inflation, mounting debts and maintain an emergency fund todeal with unexpected needs. An investment calculator assists one tomake an informed decision. It aids in the choice between short andlong-term programs. An individual’s financial resources are scarcein spite of one’s daily income. Savings help one to find an extrabudget, change their habits and put money towards future endeavors.
Comparisonbetween Early and Late
Using$250 as the amount one will deposit each month for 25 years with anannual interest rate of 3%, the amount of money at the end of theperiod will be $111,501.96. After saving the same amount of money forten years at the equivalent interest rate, the final amount will be$34,935.35. Using the difference in the amount, long-term investmentshave a higher future value. Compounding the money for a long timeincreases the value more as compared to a short period (Wray, 2012).Starting the savings early increases its value with time.
Tostart saving early in life, I have to give up luxurious commodities.Achieving it requires making a budget for my monthly income andadhering to it to achieve my financial goals. One of the habits Ihave to forego is eating out. It costs less cooking at home thangoing to expensive restaurants. I also have to abandon cabletelevision, daily gym payment, regular purchase of electronicgadgets, impulse buying and designer clothes. I will give upluxurious vehicles and have family vacations in the outsidecountries, nights-out, unlimited internet services and luxuriousschools for my children. I will also forego members` clubs,convenient ATMs, and movies.Iwill limit my expenditure to only the necessary goods and servicesrequired in everyday life.
Havingextra money available when I retire will make my life morecomfortable as well as providing financial security for my family. Iwould be able to cater for emergency expenses without loans frombanks. Saving enough money for retirement improves the quality oflife. I would be happy knowing that I am secure and can afford thenecessary goods and services. After retirement, my productivity andability to work for a living will reduce significantly. Having aregular monthly income will enable me to tour the world, pay for mybills and assist my children and family members. It will alsoguarantee the availability of funds for my medical expenses notcovered by the health insurance package. Being secure prolongs lifeand freedom from struggles to make ends meet (Wray, 2012).
Despitethe sacrifices that one has to go through while making a budget,saving early guarantees future payments after retirement. One canremain financially secure after employment. It improves the qualityof life by securing a decent pension. The power of compounding allowsextra interest on the extra money received from the investments.Starting saving early in life ensures that there is a substantialamount of money gained in the form of interests. One also getsfinancial discipline and better management of the investments risks.It is an opportunity to correct past mistakes and mitigate futurerisks.
Wray,L. R. (2012). Modern money theory: a primer on macroeconomics forsovereign monetary systems. Houndmills, Basingstoke, Hampshire:Palgrave Macmillan. pp. 45–50.